Back to talking dbank dividends. After the stop imposed in 2020 due to the Covid-19 emergency and the need to "maintain the banks' ability to absorb losses and support the economy in a scenario of exceptional uncertainty", in 2021 some large institutions could, with "extreme prudence", return to detach the coupon.
No indiscriminate opening from the ECB, but sounder banks with better asset quality could be given the chance to keep their investors happy.
During a press conference organized to present the Srep 2020 data, the number one of the ECB's Banking Supervision, Andrea Enrico, confirmed that “with asset quality becoming more visible and capital projections more reliable, ECB Banking Supervision will return to ordinary supervision of dividend distributions and share buybacks in 2021”.
So this year there won't be no prohibition, as happened in 2020, but a discussion to understand which is the right path to follow has been underway for some time. “We have received feedback from the supervised banks in this regard,” explained Enrica, “the dialogue is ongoing, and there are technical discussions on issues of calculating the capital buffers available for coupons. Feedback agrees with our recommendation."
European banks, Enria said, have provided “positive indications” on their willingness to comply with the requests of the Supervisory Authority, which last December had advised "extreme prudence" on the subject of distribution, suggesting limit the coupon to 15% of the profits cumulated 2019-2020 and not to exceed 20 basis points of Cet1 capital.
Banks are expected to contact their respective joint supervisory team to determine whether the expected level of distribution is prudent. Land banks should refrain from the provisional distribution of dividends from the 2021 profit".
In summary: healthier banks will be able to return to the coupon, but avoiding giving large sums and still using the vast majority of profits to deal with the economic consequences of the pandemic.
